Assessee's Appeal Dismissed, Upholding Adjustment for Late PF/ESI Deposits

The appeal of the assessee was dismissed, and the adjustment under section 143(1)(a) for late deposit of employees' share of PF/ESI contribution was upheld. The disallowance of employees' contribution to PF/ESI under section 36(1)(va) read with section 143(1)(a)(iv) was confirmed by the ITAT, affirming that the disallowance made by the CPC was in accordance with the law and falls under the prima facie adjustment as envisaged.

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Issues Involved:
1. Disallowance of employees' contribution to PF/ESI u/s 36(1)(va) r.w.s 143(1)(a)(iv).
2. Prima facie adjustment u/s 143(1)(a) by CPC.

Summary:

Issue 1: Disallowance of employees' contribution to PF/ESI u/s 36(1)(va) r.w.s 143(1)(a)(iv):
The assessee filed its return of income declaring total income of Rs. 83,16,645/-. The return was processed by the CPC and an order u/s 143(1) was passed, disallowing Rs. 3,46,006/- for failure to pay employees' contribution to PF/ESI before the prescribed due date. The CIT(A), NFAC upheld this disallowance, stating that the employees' contribution can only be allowed as a deduction if paid within the prescribed due date under the relevant welfare funds. This position of law applies retrospectively. The ITAT confirmed that the disallowance made u/s 143(1) by the CPC was strictly in accordance with law and falls under the prima facie adjustment as envisaged u/s 143(1)(a)(iv).

Issue 2: Prima facie adjustment u/s 143(1)(a) by CPC:
The ITAT referred to the decision of the Coordinate Chandigarh Bench in 'Emson Tools Mfg. Corp. Ltd. Vs. DCIT, Ludhiana' and the Hon'ble Supreme Court in 'Checkmate Services P. Ltd. & Ors. Vs. CIT & Ors.' which clarified that the employees' contribution to relevant funds is the employer's income u/s 2(24)(x), but the deduction can be allowed u/s 36(1)(va) only if deposited before the stipulated date under the respective Act. The ITAT also cited the decision of the Coordinate Pune Bench in 'Cemetile Industries & Ors. Vs. ITO & Ors' which emphasized that the disallowance u/s 36(1)(va) can be made during the processing of return u/s 143(1)(a) if indicated in the audit report and not accounted for in the return. The ITAT concluded that the CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) for late deposit of employees' share of PF/ESI contributions.

Conclusion:
The appeal of the assessee was dismissed, and the adjustment u/s 143(1)(a) by means of disallowance for late deposit of employees' share of PF/ESI contribution was upheld.

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